Editor’s Note: In 2010, one in seven Americans lived on or below the poverty line, according to figures published by the US Census Bureau, making it the sharpest annual rise for three decades. Unlike many other rich countries, the US lacks proper welfare systems. In fact, contrary to the popular myth of American Dream, many US citizens really are two paychecks from the street.
Author: Dr. Abdul Ruff
Edited by Divas
US President Barack Obama has called for action to remedy what he described as profound income inequality and a lack of social mobility in the US. He called for a rise in the minimum wage and for stronger collective bargaining laws, among other measures. He claimed that his embattled healthcare overhaul would ease American families’ financial struggle.
The White House announced that Obama will visit Pope Francis on a European tour in March, looking forward to discussing their “shared commitment” to fighting poverty and growing inequality.
Obama expressed his concern that the country had accepted higher levels of economic inequality than other developed nations because Americans are convinced that America is a place where even if you’re born with nothing, with a little hard work you can improve your situation over time.
The Income Gap
The income gap between the richest 1% of Americans and the other 99% widened to a record margin in 2012, according to an analysis of tax filings. Income inequality in the US has been growing for almost three decades. The top 1% of US earners collected 19.3% of household income, breaking a record previously set in 1927.
Overall, the pre-tax incomes of the top 1% of households rose 19.6% compared to a 1% increase for the rest of Americans. And the top 10% of richest households represented just under half of all income in the year, according to the analysis.
Income includes wages, private pension payments, dividends and capital gains from the sale of stocks and other assets, but it does not include unemployment benefits or federal public pension benefits, known as Social Security.
While the crash of 2007-09 adversely affected moslty the top earners, benefits of rising corporate profits and stock prices since then have largely gone to the richest, according to the study.
Incomes among the richest fell more than 36% between 2007-09, compared with a decrease of 11.6% for the rest of Americans. But in the last three years, 95% of all income gains have gone to the richest 1%.
The top 1% of American households had income above $394,000 (£250,000) last year. The top 10% had income exceeding $114,000.
While acknowledging the political difficulty of passing any such government action with a divided and acrimonious Congress, Obama’s speech in Washington DC gave a broad overview of economic themes for the rest of his term.
Obama, a Democrat, said rising income inequality had been accompanied in recent decades by diminishing opportunities for social mobility.
Obama faulted tax cuts for wealthy Americans, declining investment in schools and infrastructure, and laws that have weakened labour unions, compounded by broad structural changes in the global economy.
“The combined trends of increased inequality and decreasing mobility pose a fundamental threat to the American Dream, our way of life, and what we stand for around the globe,” he said.
“The idea that so many children are born into poverty in the wealthiest nation on Earth is heartbreaking enough. The idea that a child may never be able to escape that poverty because she lacks a decent education or healthcare, or a community that views her future as their own, that should offend all of us and it should compel us to action,” Obama lamented.
To remedy the growing income inequality, Obama called for a rise in the national minimum wage, currently $7.25 (£4.43) – as low as it was during the administration of President Harry Truman in the 1950s in terms of spending power. Several states and cities have raised their own minimum wages, most recently New Jersey and Washington DC.
A proposal is currently being floated in the Senate to increase the national minimum wage to $10.10 in three steps and tie further increases to changes in the cost of living, but its path even through the Democratic-controlled Senate is unclear.
Obama suggested targeted programs for cities and regions hardest hit by the 2008 recession and other sea changes in the US economy, such as universal preschool education for young children, a shoring-up of the US pension and social safety net schemes, and laws to make it easier for workers to organize into labour unions.
Obama also pressed Congress to extend unemployment benefits to 1.3 million people who have been unemployed long-term, set to expire toward the end of December.
Additional weeks of benefits have been approved since 2009, but recently, a senior Republican congressman, Representative Tom Cole, said his party opposed an extension.
Obama said US government policy must remain relentlessly focused on strengthening the economy. “It may be true that in today’s economy, growth alone does not guarantee higher wages and incomes,” he said, “but USA can’t tackle inequality if the economic pie is shrinking or stagnant.”
The US president argued rising inequality was eroding trust in institutions and reducing civic and community involvement claiming that “growing gap” was as much about class as it was about race.
While in Rome, Obama will also meet Italian President Giorgio Napolitano and Prime Minister Enrico Letta. He will visit the Netherlands for a nuclear security summit, and will meet Nato and Belgian officials in Belgium.
Obama’s visit to Belgium will include his first official trip to two EU institutions – the European Council and the European Commission. Obama is scheduled to meet is Nato Secretary General Anders Fogh Rasmussen.
The inequality rise may have been in part because of sales of stock to avoid higher capital gains taxes in January. Despite recent policy changes aiming at lessening income inequality, the measures were relatively small in comparison to policy changes that took place coming out of the Great Depression.
Therefore, it seems unlikely that US income concentration will fall much in the coming years.
Poverty and inequality have stayed because of pro-capitalist ideology the White House has pursued for too long, and also as a result of unwillingness by the policy makers and plan executers to create the right environment for change.
It seems the American dream of global capitalism by all means is slowly changing possibly for the better.
It is unfortunate that US president is unable to get top politicians, seeking self-centered huge capitalist profits, onboard to help reduce US poverty and inequality.
Obama’s major worry now is that his approval ratings have plummeted in recent weeks. He feels unless his regime does something tangible it may not be easy for the Democrats to win the next Presidency.
The issue here is whether USA can become a normal nation without hidden war agendas so as to focus on domestic policy very seriously to commit to people’s genuine problems.